Skip to main content
9:00 am
>> please identify yourself. i'm perfectly happy to accept not only questions but declarations as long as they're reasonably short. you can't write an article here in front of the audience. okay. and we've got a microphone around so when i call -- let me start right here because the microphone is here. >> thank you. i'm a chinese reporter working for 21st century business herald. thank you for all of you coming here and give us such a good speech in the middle of the summer. my question would be addressing the china case. based on the panelists' observation of the president's limited record on trade policy, what kind of -- do you think -- what kind of decision do you think the president is going to make on this case? do you think he's going to grant the remedy on this case and why?
9:01 am
>> okay. guys, we're away from big principles right to the nitty-gritty. who would like this? >> if i had to guess, i would guess that there is someremedy. but it's really hard. and here's why. i could tell you a story that goes in neither direction. i could say well, they faced a similar conflict when it came to the name china as a currency manipulator. it was repeated, and it was the same conflict between the -- what the chinese government clearly wanted, and he opted to net -- not name china of currency manipulator in april. on the one hand, if you could say that that is really telling us where they're true preferences log. again, they will face similar choices. or you could say that put them deeper and hot. they need to make sure that --
9:02 am
they need to do something to appease their political base. ipod toward that ladder, but you could tell either store -- i oughpt for the latter, but you could tell either story plausibly. it was a low hurdle that the u.s. could put import restrictions on china with a minor injury occurring to domestic industry. there are a number of such cases under the bush administration. i could participate in a couple of these decisions. it is a bilateral problems -- of bilateral policy in a multilateral world. great public concern about trade with china. there was pressure to do something. the problem was that whenever look at the situation, what became clear was that if president bush had chosen some
9:03 am
of these earlier cases to that, it would meant that imports coming from china would have come from other places, vietnam, india, or brazil. even if we had only been worried about u.s. workers and not u.s. consumers, this would not have donenything for u.s. workers. these are some of the same discussions that we're seeing now. the problem is that there were strong philosophical approaches which said that the reason the bush administration did not do this was this ideological commitment to free trade and they are willing to sellout u.s. workers and things would not be any different. that premise would make it very hard to say, we just checked and there are more countries out there than just china and this might not actually do much. >> of political comment, because none of us are confident the deal with the technicalities of this particular case. as phil mentioned, surge protection was part of a deal to
9:04 am
get congress to deal -- to mix at dublin's -- wto admission for china. whether or not any of these cases merited its use, a lesson that people in congress who made this deal will clean from what the bush administration did -- and let's assume that the obama administration rejects the case as well -- is that you cannot trust these kinds of deals with the american -- with the executive branch. that makes trade agreements harder in the future because this was a face-saving measure of how people concerned with china coming into the wto. there is a political consequence that has to be considered very strongly. secondly, somehow we have to have an adult conversation with beijing about the fact that we can all wk and chew gum at the same time. we can fight over things and still work together. the chinese want it to be all or nothing. we have cases with the europeans on very difficult issues all the
9:05 am
time. it does not impair our discussions with the europeans on a whole range of issues. we tend to, whenever we have a trade fight with the chinese, find out that the chinese will not show up for meetings or talk in the meetings when we have them. their noses are out of joint. the chinese have to learn that in the real world of global trade politics, you cannot -- you can fight and talk at the same time. and again, purely diplomatic reasons, we send another signal to beijing that we do not want to upset to hear you will retaliate. we enable that dysfunctional behavior by the chinese and we should avoid that. >> bruce is right. rightly or wrongly -- and this could be bipartisan here -- a decision that goes along bowlines of bush administration, which i would support for other reasons, would feed into the
9:06 am
skepticism of the legislator about the executive branch. i have to can see that. -- i have to concede that there the president wants all the details. congress is going to come aft you more. that would try to cut your off party, you're leeway, your discretion. i also think in terms of china, i think the chinese are finally beginning to be more comfortable with wto cases. we had this situation with the democrats beat up on the republicans. they had not done enough cases -- initiated enough cases against china when they knew the dirty secret. everyone had agreed, wto members, in order not to swamp the wto with cases, he would ease off. only after 2006 with the china -- they're all obligations.
9:07 am
the chinese reacted as if somehow this respite that they had was the way things ought to go for a long time. now they have realized that they are better off if the united states and the europeans and japan or whoever goes to wto than the alternative, which is unilateral or some sort of combination. i'll come right here. if i miss the on and on the back -- if i miss any on the back, please raise your hand. >> i am with the dartment of commerce. i was very intrigued by several speakers' comments moving on the concept of the informaon technology agreement. the trade environment in the wod is quite different than it was windy fta was imposed in implemented. what d.c. as some of the
9:08 am
political challenges to sectorial agreements? at a think our major trading partners and bric countries would react? >> i will take a shot at it. i am skeptical of the secular approach. i am not sure that the problem is domestic problems, because you can pick your sectors. if we are setting the agenda, we picked a sector where you do not have those domestic political problems. the difficulty is finding a sector where you have lots of countries around the world to all see themselves as gaining from an agreement. in particular circumstances, information technology, although i have heard from some participants that they think that they were an error, that they should have been holding out concessions to get something unrelated. i completely agree with the premise. i think that deal is stouck
9:09 am
and we need to think about different things. we often need that to try to find a balance deal where you have the right number of participants. that would bthe question i pose. i'm skeptical that you would find those types of alignments on the international scene. >> those are reasonable concerns. i would say that there has been no multilateral trade agreements in 1998. there is reason to be skeptical about almost any initiative. trade hot -- trade policy is hard. it's hard to get countries to agree to anything and there are always reasons to say doha and agriculture is too hard. they're not many countries that want agricultural reform. that could be the fate of an environment and energy agreement. the path that we have been on since that is one where we have
9:10 am
not had many agreements. if someone has a better idea that will create as much growth and employment here, i welcome it. the path that we have been on doing gold standard fta's, pushing at her watch what -- nicaragua on the issues has not been productive. he and thinking that the big countries in the big industries will be productive. >> the dirty secret is that the only way that we will get many of these guns is if we abandon the multi nation principle that is apostasy in the trade theology. what i am struck with in private discussis with trade people all over town, is how often they volunteer the fact that we need toethink that.
9:11 am
i think that that is one of the challenges we are going to face, intellectually and politically, goin forward to enable that strategy, which i think ishe right way to go. that is one of the obstacles we will have to wrestle with. >> one observation. i am not so convinced of that. if you look at the world as the industries, we get -- reticulate technologically sophisticated ones, there are only 10 or 12 countries that are participating. the others are bystanders. having an mfn-based policy was fine because it include all of them. i am not so convinced that you would have to make that choice. beyond that, because of all our preference is, we had made it already. we do not have many mfn policies except for those that wear white ita.
9:12 am
-- that were like ita. >> i am a lawyer in town. i was struck by the fact that working for the aba and trying to open markets for american lawyers, it has proven to be quite difficult. in fact, to the extent that we're successful, it is because we ignore the rules in other countries that would otherwise keep us out. i was struck by the fact that also --ll those services are 75% of our economy, all of this discussion of trade rest on the exchange of goods and farm products, and very little attention is paid to the services sector, which is such a significant part of our economy, and the europeans as well. i wonder if the same dynamics that are affecting production of goods will also affect services, which is the big growth of our economy.
9:13 am
>> this is a very good point. $9.50 trillion and manufacturing, $2.70 trillion and natural resources, $1 trillion in agriculture, and $3.50 trillion in services. in gener p $5 trillion in services. for the purposes the u.s., it's more like from%. u.s. has one of the most heaviest trade portfolios in the world and i think any american trade policy that doesn't have services a core objective is not serving the country all that well. >> i agree with that. there's some history here. a couple of things to keep in mind. one, the -- was a really big break-through in services and you had growth in terms of substances and those of us who live through it too, a lot of the political muscle came from service companies. they didn't get everything they wanted but it seemed to the world and it seemed to them they
9:14 am
had gotten a lot so as you got to the doha round, there wasn't a lot of -- didn't guinn up a lot of interest and also this was the doha development round or this is how it was advertised, so for a lot of time, people paid little attention to the services. the service industries in the united states and around the world have waken up to the fact they have been ignored and this is true and i think the bush administration was guilty here until the last year or so wn it finally began to say in the wto negotiationings, you cannot ignore services. i mean, a proposal was put forward about eing the round last year, which really put services off as second class citizens and that finally i think stirred the services and that has stirred the administration and i can't believe the obama administration is not going to be -- it too will be looking for political support, not being pushed forward, that we get some in the final package, that you get some advance in some sectors. now the bad news for that is
9:15 am
that's very tough. it's coming late, the developing -- the bricks have have to tell us exactly what you will do, but we want something on the table with services. that's another pnt about the obama administration faces a situation in services as well as manufacturing and agriculture where our page or interest groups are saying what's on the table now is not adequate and i don't know how that will play out. it has been belated but it is there is. i'múgoing to keep going. >> barbara whitman and i am an economist who served as the trade policy coordinator in the western hemisphere for the state department for four years. the striking point that i welcome from ed gresser this morning is there will be action on both preamps and ft a's.
9:16 am
we talked about our standing -- [inaudible] and about the fact that there have been six positive votes that grant lower terrorists in the u.s. and only since we passed one reciprocal agreement. the fundamental point we've been addressing for a good long time is that we are very nice about giving lots of poor countries access to our markets, and what has been the goal of all the reciprocal ft a's has been to convert a one-way street to a two-way street that benefits our exporters. now the general comment about fta's and there being all partners, the fact is, i've worked 40 years in multilateral negothatns of one kind or another and you never get there at the table with everybody. you get there one by one. if you have to do it with fta's, before you have a exon basis of understanding of -- common basis of understanding of having worked together or you can do it what i am looking at now in e
9:17 am
fall fall, or early next year, when we have to deal with the preference programs in the fall, the problem as i see it with the preference programs. [inaudible] in the absence of going ahead with the reciprocal trade agreements -- [inaudible] go on and on with a pattern where washington likes to give away our markets without getting any exporters. part of that reason is that most -- >> can you get to the question. >> it will be. give me 60 seconds. part of the reason is we have a lot of people -- that's the way of doing business in washington. the lobbyists for the countries keep getting their preferences and nobody seems to be convinced that you want a permanent -- you have a reciprocal agreement it's permanent. they want to punish countries and take away their programs and not give them reciprocal
9:18 am
agreement. the question is canada signed an agreement with panama, we have one pending with canada. very likely that canada is going to ratify theirs before we can hope and think that this can put any pressure for the approval of some of our agreements, because when we look at our competitive ranking, chile, who has all these bilateral agreement does very well, we do very badly. canada has jumped the market on us with several countries where we couldn't get it through. does anybody think yesterday's action will help us? >> no. the stakes are high enough and the sort of political constraints are big enough that whether it's the e.u. with korea or canada, with panama, i have a hard time seeing that as the factor, saying oh my goodness, i think trade is important. disagree with thettle bit. administration but administration, but i would be interested to reaction from
9:19 am
others, that the e.u.-korea agreement if it goes through, will set off at least some pressure. it will be just -- and then you go with other middle sized to large -- if the e.u. continues, and there are a number of middle sized countries, japan then moves, you're really getting to the point where there is from a marketless points of view, which is what drives politics in the united states, there's going to be a reaction and it's going to be somewhere down the road, just like 2001, with bob come in and turn around, the caterpillar company and general motors -- u.s. motors now, general electric, whatever, and say, look, we've got all these great deals, chile has a 15% tariff on tractors, cat pill larry and we're getting screwed by the fact we have to pay it. it will build up. how it works out may be right. it still may be not pressure and this gets to a point that ed made, i agree that these were small [beep] fta's, but we're getting to the point that you
9:20 am
were talking about economies that are fairly large and so in the future, whether it's a bilateral or we go to regional, which is quite different, i think that the dynamics will change and the numbers will change about the impact on the u. economy. >> i hope claude is right. i think it would be in the national self-interest if that is what happens. i think the most important thing you said though was you described a process that has been going on really more or less for the last two generations, which is tre policy has been the hand maiden of foreign policy, and we all know, as densons of washington that the foreign policy establishment in this town is stronger than the trade policy establishment, and that will be hardo overcome. but i do think one of the lessons of the great recession, and the need to have a more sustainable current account balance, is that we can no longer afford to always defer to
9:21 am
foreign policy needs rather than economic policy. doesn't mean economic policy and trade policy needs always trump foreign policy needs, they shouldn't. i think the strongest argument for the korea fta is a foreign policy argument, but that said and done, at the margin, if we're going to ensure ourselves that we have a more sustainable current account balance going forward, it seems to me that there has to be greater priority placed on the economic reciprocal economic benefits for the united states. >> hi. i'm with global strategies. my question is, i know nobody really mentioned canada until the lady asked the question, and kind of being the biggest trading partner with the .s., i feel like the administration has been ignoring the complaints from prime minister harper about buy american, so since there are
9:22 am
many jobs, thousands of jobs that rely on the relationship that we have with canada, my question is, is buy american really affecting this relationship or is just buy american a provision that was added to, you know, please the labor groups that support oba to be elected and actually not going to have a long-term effect this this relationship or is the u.s. in a way taking for granted this relationship and always paying asteps to the ones who made more noise like china and -- attention to the os no made more noise like china and mexico he? >> i think it's not over yet. i think there's a temptation in the city to think that a trade dispute comes along, there's a fight and within a few weeks you know the outcome. that's not the case in this instance because the funds being disbursed through the recovery act are coming out at a relatively slow peace, we'll see them coming out over a year or two. over time, we're going to hear more and more complaints from
9:23 am
u.s. companies and from canadian and european and other companies, jobs being disrupted, lost, so this thing is not going to go away any time soon. i do think it's a real threat and the canadians are not about to drop it. >> can i make a point on that though? this do protest too much. the real reasonhis is a battle is because there's money on the table now. there didn't -- as john pointed out, much of what we're doing is legal under any obligation we have under the wto. not all of it, but most of it. and i was recently talking to the folks in brussels at dg trade which is our equivalents of ustr, because they have begun a free trade agreement with canada, which to make claude's previous point, i think would be a real eye opener for us, if it actually succeeded. i asked the folks in brussels, what did they see as its largest obstacle to a free trade agreement with canada? theyaid the buy provincial
9:24 am
provisions in the canadian law. the canadians have the same series of buy canadian problems that we have in the united states with our buy america. but it's easy to pick on the united states. we're a big target, we have broad shoulders, there's received you'll kind of anti-americanism that runs through this, it's a nice thing to kick the americans in the shins a couple of times. it is beyond me why we don't kickback, but you know, let's face is it, we're all sinners in this game. the europeans have some of the same buy national in their european provision an we should ke some of this with grains of salt. >> first comment would be that it's a good starting point for assessing u.s. current trade policies, ahinese prope everybody. many a false step is taken by standing still, and timing is
9:25 am
very important and -- in this very dynamic world and my second comment is to agree with chad and others. the fta's with canada and others i think are going to make much more urgent that we decide which way we're going to go, particularly on the korean agreement, even the panama agreement. where is caterpillar here? several billion dollars of building a cal and caterpillar's main competitor for the heavy earth moving equipment is a canadian firm and that's why canada as in. my question is me about the doha round and so seek -- i don't see he this moving so fast. we can standstill aot longer. because people talk about 2010, but that's the modalities, the abstract formulas. in past negotiations and i go back around kennedy round, tokyo
9:26 am
round, modalities with one or two years and then the real negotiations begin with exceptions and balancing. it's a huge undertaking and negotiations can go on for years, so my o feeling, but i'd like your reaction, is when you talk about maybe the modalities in late 2010, there's at least a couple years before you can have a specific agreement with all the listings, which you need before you could approach congress. so i would see doha round, this 2012 or 13 before congress would really have to focus on saying yes or no and then i -- i asked your reaction. am i being too relaxed about how long it's going to take? >> i do think it's a very difficult juncture. but the business community in general thinks that ambassador kirk has got it right. the modalities such as they are, are unlikely to -- if we just sign on the dotted line right
9:27 am
now, would be unlikely to generate significant new market access for american exporters in my sectors. this exercise of trying to obtain clarity about what exactly the united states would hope to get in market access, i think it's telling that it's proving to be very politically sensitive with other countries so we wish them, you know, the best of luck an we're backing him up. if he fails to get the clari that he's looking for, and that vision is attained, we see something reasonable. then it's hard to see what the next steps are going to be. >> agreement on modalities is the preliminary spin. then the real negotiations begin. >> but so much is built into the modalities, that's best the way this round is. >> and also, the developing countries are already interpreting this new obama administration initiative, as an
9:28 am
attempt to move to a request or offer approach. so we'll see how they react to it. their initial reaction has been negative, which is a reminder again that progress in this round is not just dependent on us. if in fact, we get rebuffed on moving into a more clarifying request, offer, approach to the modalities, then you know, who is the onus on, us or the people who refuse to demonstrate more clarity? >> i'm going to partially agree with you. i think there are real concerns about how this is going to move forward. i don't think it's set in stone that it's two years after you do modalities that you make any progress. i do think that what you need is prolonged u.s. leadership. bruce is totally right, this doesn't entirely depend on us. i think you've had an awful lot of will apartment of the administration last year -- on the part of the administration last year and i don't think it was the administration's fault that it didn't work, nor the democratic congress.
9:29 am
the other players really do matter. however, it's also true that i think ut leadership real -- u.s. leadership is key, it's sufficiently complicated, the u.s. is sufficiently big and that's prolonged u.s. leadership. i have very little don't that if somebody dropped a reasonable doha package in the oba administration's lap neck month, they would -- next month, they would say that's great. the problem is it's going to take a substantial amount of time and effort and working with various groups and that's why it doesn't work just so say, well, i'm sort of passively disposed towards trade, if there's going to actually be progress on this multilateral front, you have to have active engagement and the other problem we face is lowering ambition in doha doesn't quite work, because it's not that everybody has gone 25% of the way towards an ideal agreement and we can wrap it up there. people that move at different speeds and therefore, that's why you're getti this as you well know, why you're getting the
9:30 am
sort of push back, so i agree with you, that it looks like a long haul, not necessarily though that the modality thing is an insurmountable obstacle. >> we have time for one question here in the back. >> i just want to thank erybody -- >> could you -- >> -- thank everybody here for an outstanding presentation, particularly bruce's data on analysis, the new moment of opportunity and i think we've got to truth the administration to know politically when to make that move to seize the momt, if you will. and restore a pro trade progressive consensus in the united states. they are uniquely positioned to do that, because they listen to -- take input from everybody from traditional business community to the labor unions, which by the way, are 50% of the democratic electorate, labor union households, and 25% of the overall electorate.
9:31 am
so their needs have to be accommodataccommodated. point one. point two, this 421 has come along, for better or worse, and enforcement is critical to the building block of bringing middle class americans along, like labor union members on a trade consensus. i wanted to ask a broad question to close here. i agree that the larger scale issues, like conclusion of doha, are easier to get political consensus for, than smaller, less consequential bilaterals, but there's three major issues you haven't addressed -- >> we really have to move now. >> the tpp, its transpacific negotiation, is that a good opportunities r the u.s. to assert its leadership on? the anti-counterfeiting agreement, critical with all the i.p. enforcement consensus that exists in this country that we need to perhaps build upon and
9:32 am
bruce, particularly, the u.s.-e.u. clearing out of the underbrush that's occurring, can that lead to broader bilateral initiatives between us? >> i'm going to exercise the right of the plenary to say those are great questions an we will answer them in subsequent meetings, but i -- my libertarian antenna, about trusting any government, whether it's obama or bush or clinton or carter. but secondly, i do enforce very much your point that this has been a great panel and please join me in thanking them for their time. [applause] >> and we are live now at the commission in washington for the first of two discussions today on plans for national access to high-speed internet or
9:33 am
broadband. the econoc stimulus package passed in jaary calls on the f.c.c. to develop a plan by february 2010 as part of the process, the f.c.c. is holding a series of workshops on national broadband one this morning here and another we'll cover this afternoon. live getting underway here on c-span2. >> i encourage you to read their bios, because it is a very impressive panel. first we have jim prieger, an associate professor of public policy at pepperdine and actually just finished spending a year here at the f.c.c as a senior economist. he specializes in industrial organization, applied econometrics and writes more broadly, such as on cell phones and driving and the effects of the americans with disabilities act on retail firms, so if you have very question about economics, come see him afterwards. >> thank you very much. well, i want to thank scott,
9:34 am
don, and the commission for this opportunity to come back. in some ways, it feels like just coming bac from my august vacation, being back at the f.c.c. so i asked to speak first because what i'm going to do is try to provide a bit of an overview on the topic of today, from the standpoints of academia and academic studies that he been do, that hopefully will be useful to set the context for what we're looking at so i wanted to start by looking at macro approaches that have been taken to measuring, to a lesser extent, employment, most of what ll talk about today has to do with productivity studies and there's, the smallest literature is that that deals with broadband if particular. stepping back, a lot of -- well, many mother studies have lood at communications technology and then there's a middle set of studies that have looked at communications more broadly than just broadband, so most of the results that i'll mention have to do with ict, because, to be honest, there are very few that
9:35 am
look at broadband specifically, but many of the same issues pertain. so these studies disaggregate to different levels this way, but regardless of the type of study that they are, there are two main approaches. the first is to do a traditional growth accounting study and this is basically just the economist's version of an accounting exercise, where your try to disaggregate the sours of growth, product growth in this case, into growth of capital, growth of labor, growth of other iut and in this case, broadband is treated as just a specific type of capital. or ict more generally is treated as one type of capital that you look at or you can do an e econometric studies. look across countries or sector and do a macro-typstudy. regardless of which type of study is done, at this point, the effects of ict and broadband do show up quite strongly. it took while for it to
9:36 am
happen, there was a product paradox that happened until the mid 1990's, but since that time, tears been an unmistakable relatively large impact. to give one example from one study, i won't talk about a lot of specific studies this morning, but a typical study finds that during the boom late 1990's years, three quarters of the labor productivity growth, in other words, 1.8% of the 2.5% growth rate was due to ict. very large a amount. maybe too large. makes you wonder. in the early 2000's, that number drops down a bit, but the key here is that ict is an enabling technology, it makes people do what they do better, faster, an cheaper, and so it, you know, these impacts should be there and they do show up. now, just as a warning, growth is not always a win-win situation. part of the growth at the macro level might come from less productive firms being forced out of a market, which makes
9:37 am
room for more productive firms to come in. so you have to keep that in mind when you're looking at aggregate numbers hands other thing i want to emphasize this morning, there's a lot of het tremendous genomicsate in the impact. enclosresults may vary. past performance is no guarantee of future ruts. it's not just dollars spent on ict that matters, so as we think about measuring impacts of national broadband plan, we have to do more than just measure the amount of inputs that we put out there and i'll return to this in a moment, because there are certain in tangible factors that matter a lot. ok. so those are macro studies. you can also do microeconomic studies and you can get more out of the data if you have firm level data. now with firm level data, it's always tricky in united states and i'm not looking to europe to take our lead on these matters, but it is interesting to compare the data collection efforts and the differences there, so the european federal data effort,
9:38 am
euro stat survey is well over 1,000 firms, they have plans to grow the survey, to grow the sorts of questions that are asked and they ask many different questions on many different things to do with ict's and broadbands in particular. it's a good data set. we should expect to see good studies coming out of that. u.s. census does a bit less at least with what i would find. they survey toúfind out what firms are spending, because they want to get there into the national income and product accounts, but he they don't have anything on what they're using it for and what the results might be. more could b done being. as with the macro studies, they're generally positive results, when you look at the impact of ict on firm performance. but there are similar issues with these firm level studies that you need to be care if with. again, heterogeneousity and the impact. it matters very much in what countries you might be looking rmings for example. there's a problem potentially
9:39 am
with saying, well, what type of firms april don'ted broad bands? it's going to be the ones who got the most bang for their buck adopted it first, so if we only look at studies that have those sorts of firms in the sample, you'll get lge numbers of the impact of broadband, but you might not be able to extrapolate that reasonably to the next round of firms or the subsidize important. and then intangibles again become important. let me just go an talk about what these are instead of just wanting that term about. for example, human capital, education an training. we all know that if a new computer program or a new technology is plopped down on to your desk without any instruction or the notion of what it could be used for or how it mht help, it will just sit there. the same is true of course with technology such as broadband, but it's more than just that. there is this whole new substrands on the literature on the complementary investments
9:40 am
that have to take place. in other words, broadband needs to b used and coupled with changes in perhaps how the firm is organizedn for it tto be made use of. broad bands enables collaboration across firms, inside and outsidef the firm. will the firm's organizational structure allow thats@ collaboration or are you silo'd into different unit that don't get to talk to each other or are encouraged to talk to each other. competitive pressure is always -- has been found if these studies to be important, to get the maximum gains out of the new technology. how flexible is your labor market. is it liberalized in the european context, that becomes question, because productivity gains might come from doing more with fewer workers. are you able to do that? that's the question. and that's one of the reasons why europe has probably lagged the united states if productivity growth. implications. why do tse factors matter? well, what it points out is that broadband is not just a band aid
9:41 am
that you can slap on to an ailing sector, an ailing market or an ailing economy. it has to be used intelligencely and in conjunction with other things. good example of this, this is not a panel about education, but just to use an example, the u.s. schools, schools provide an example where most of the intangibles work against having broadband me an impact. for example, lack of ict competency, it's knots what most of the teachers may have been trained if or trained for. training for the teachers might not be funded. they have might have rigid organizational structures, there is a lack of competition, lack of flexibility in adjusting labor. as recently as a decade ago, a government panel reported to then president clinton that "the history of ict in schoolsas a 20 year story of unambiguous failure." i think things have gotten better since then, probably a lot better since then, particularly with broadbanding of funding for schools, but the point is you can't just measure an impact of broadband, slap it
9:42 am
on to a new firm and expect all these things to change. ok. two minutes left. this is good. very quickly, on employment. just want to mention, there's lots of employment numbers being floated around there, in policy circles that i noticed in the last year about the impacts of broadband. some of the other workshops here have even taed about that. i'm a little unconvinced for the following reasons. unconvinced about the exact numbers, not that it can have an effect on employment. for example, it's really hard to say what caused what. you receive broadband growing in an area, you see employment growing in hand area, assign causality to one of those two, to the other, is always tricky. it's a hard thing to do. i have haven't seen that really nailed down in a convincing way yet, not to say it can't be done. there's always a question of mobility of workers. if town x institutes -- deploys a lot of broadband or ict and attracts workers away from
9:43 am
neighboring town, why from the state's points of view is that necessarily a good thing. you need to think about that. the other issue, with you have more productive workers, because they have more ict and broadband to work with, in general, that's, you know, after that transition is done, if you still have a job, that theory suggests that's a good thing, because your marginal product has risen, so your wage probably is higher now. but the firm might be able to do less with -- to do more with fewer workers, so it's not clear. there are a lot of things going on there. and just very briefly, there's the whole globalization question. senators from require states often like to wax eloquent about how broadband can heldraw their rural workers into urban work forces through telecommuting and so forth and that's fin but why rural indiana and not rural indiana. once you break down that are distance barrier, that barrier is down. so again, not to say that there
9:44 am
aren't good impacts on employment, but that it may be a little more complicated than sometimes we think. ok. let me just close with one suggestion here per second for the national broband plan. more data is always better and i realize -- firm level surveys are probably not what the f.c.c. shou be doing, but this is a fat broadband plan, not the f.c.c.'s broadband plan, so we can get congress involve to fund consensus. we have a great plan to evaluate firms horgetting funding under the vtop. it has some elements of an experiment, since these are firms that otherwise presumay wouldn't have gotten the funding to do what they were going to do, so we can evaluate that and my suggesion for the analyses is, you know, here at the know, hopefully you can be freed up to do good empirical analysis, where the conclusion is going to come from the data, not from other quarters, and external analysis is always good, partner with
9:45 am
academia, there are professors across the nation with graduate students who would love to get the data to work on this sort of stuff and can help you out a lot. thank you very much. >> thanks, jim. i also forgot to mention that if you have questions, you should write them down on a cd, and give them to carrie lee earl, who will collect them. yes. so orifex speaker is brent goldfish, -- our next speaker is brent goldfarb, an associate professor at the robert h. smith school of business at the university of maryland. he studies issues such as how the production an exchange of technology differs from more traditional economic goods and national innovation systems and the relationship to firm and policies. brent,. >> thank you, scott.
9:46 am
so i'm going to use my time to talk about broadband as what we call a general purpose technology, and this is going to echo some of the thoughts and maybe unravel some of the things that james was talking about. so the original thought about a general purpose technogy is that you have some underlying infrastructure technology that is both pervasivend enabling. and one thing about broadband is it's very close to sat situation, or it's -- saturation, or it's going to reach saturation soon, so it is certainly pervasive and it is almost, most importantly, enabling. and the one thing about enabling technologies is it is quite unclear how they will be used throughout the economy, so i'm going to quote nathan rosenberg in his article about experimentation and this will get at the core of my little talk. the freedom to conduct experiments is essential to any society that has a serious
9:47 am
commitment to technological innovation or to improve productionfficiency, but the interesting part is the starting point is that there are many things thatúcannot be known in advance or deduced from some first set of principles, only the opportunity to explore alternatives with respect to both technology and to form and size of our organizations can produce socially useful answers to the bewildering array of questions that are continuing occurring in the industrial and industrializing societies. so just as by way of an example, this is an early advertisement from compuserve, circa, the late 1980's and what you see is a couple and the couple are excited about how they sent a bunch of e-mails to their friends and they called it a party and they only had one glass of wine to clean up. and so this is early experimentation, not in broadband, but certainly in internet connectivity.
9:48 am
and here's some examples of broadband experimentation from today. most of these are kind of big successful ones that you may all recognize. google and facebook i believe are number one and number three in terms of time spent on websites, orange is banking, netflix is there as well as major league baseball, video -- as video internet providers. major league baseball is the largest if terms of revenue today and of course, i put in web van, which was an internet grosser that blew through about a billion dollars to point out that many of these experiments, in fact, most of them fail. the exrimentation is in a broad range of things and technology, being, how do we exploit this broadband capability, but importantly in products and services, what are the offings of the companies. importantly, business models, how do we monetize the
9:49 am
offerings. organizational forums, given that we know what we want to sell, how should these firms be organized and of course, implementathon strategies. so how would we know if were succeeding in managing the ecosystem in the sense of encoring experimentation? -- encouraging experimentation? another way to phrase that, how do we know if barriers to entry are low enough so new firms and new experiments can be conduct to try to exploit this broadband capability? one way, is this i pulled off a tech crunch, which for its own motives, keeps track of the ecosystem of internet firms, and in the upper left, you see new firms that have been founded, in the last few weeks. in the upper right, what you're looking at is fund, venture capital funding those new firms to the tune of about a billion
9:50 am
dollars a quarter. excuse me. about a balance and a half a month. -- billion and a half a month. under that, acquisitions, which will represent successful exits, ich generally reflect successful experiments in the broadband space. so these are new services which have reached a point where they have attained enough value where somebody would like to buy them as a business. measures of the number and outcome of experiments, one thing that we might do is we might keep trk of than broadband ecosystem, so that we could know, is there -- is broadband policy successfully allowing entry and experimentation in this spacey? -- in this space? this is an example, so far, we're doing pretty well, so what you're seeing here are each one of those numbers is the number of broadband-based companies in
9:51 am
that one area. this is being the san francisco bay area, which is the center of this, but this is a national phenomenon. this is experimentation happening all over the country, and indeed, all over the world. one interesting thing is that most broadband traffic is not related to this experimentation, in the sense that our infrastructure currently is sufficient for the vast majority of these experiments. and just to point out, this is -- this graph shows us the share of internet traffic based on different protocols, the green line, which is increasing, from about 2000 to 2006 in thi graph, is peer to peer. so the green line is essentially movies, and mus, peer to peer, and probably generally most of it is illegal. so these traffic measures, are
9:52 am
perfectly related to the experimental ecosystems and we should not be confused by them, just by -- that is the first point. the second point i wanted to point out is that experimentation generates big winners and big losers, and with you have big losers, especially whether they're incumbents, they have strong incentives to try to maintain the rules, that's to their advantage. so just an example, peer to peer appears to be killing the pay for music model and of course, you need only be alive to see the activities. ri aasa and try to prevent the end of their business model. google and craigslist, plus searo cost publishing are killing the newspaper's advertise willing models and ending newspapers as we know them today. wikipedia killed brittanica, held out a lot by microsoft and incaen -- encarta and voice ovep
9:53 am
has helped in the demise of land lines. you might note that broadband providers generally bundle video content, cable and voice. and if that is true, the providers have incentives to leverage control of broadband to restrict competition particular in the video space and in telephony space. this should be sething we should be aware of and keep track of pairfully. so i'm not -- carefully. so i'm not going to use all of my time. but to conclude, to enable economic growth, broadband needs to enable experimentation. another way of saying that, we must make sure there are no barriers to entry in the provision of broadband and its use, most importantly.
9:54 am
pretty good job at this, as best as we can tell. most internet traffic is file sharing and associated with only a small share of these experiments, so the vast majority of the use on the internet and the traffic is not related to -- is associated with file sharing. yearly measures of broadband ecosystem would be informative, so if we had a sense of how well our broadband policy is sustaining entry into this space over time, that would be -- that would be very useful. and broadband providers face incentives to restrict certain types of traffic, and in turn, certain types of entry. that's it. thank you. >> thanks, brent. next speaker is ryan mcdevitt, who is a lecturer in the department ofanagements and strategy at northwestern university, and he is also a ph.d. candidate. and in addition to his work on
9:55 am
broadband and gdp, he'slso worked on the relationship between market structure and firms' ability to signal -- send quality signal measures and pricing strategiesnd hs also worked on market structure and how market structure affects venture capital decisions to specialize. >> thank you very much. i'm dlighted to be here to presents some of my research from northwestern university and the motivation for our paper is fairly straightforward. we're interested in measuring the economic value that's been created by a new good and the few good in this case is obvious hi broadband internet. straight away we can see he why we might be interested in studying such a topic, as practically speaking, it's become the primary means by with households have access to internet and intuitively, a lot of people latch on to the fact this is a popular technology, it's become a part of our lives and there must be some great economic value associated with
9:56 am
this, so our primary objective is going to be place bounds on the value that's been create, that's coming directly from broadband internet, and in this sense, it's going to be complicated by the factor that, well, broadband isúreplacing an existing technology in this case, dialup internet, which many people have switched to broadband had experience with before they crossed over. and so, to properly account for the gains that should be accrued, just to broadband, we also have to be very careful in measuring what would have happened in lieu of broadband, in this case, many of the gains were already brought forth because of dialup, so it's going to complicate our analysis. and there have been many previous estimates of the value of broadband internet, but we just weren't fully satisfied with the metdologies put forth this knows papers, because we felt they weren't being extremely careful with applying economic principles to actually measuring the gains, so in our paper, we're going to be very precise about how we measure economic value as created by
9:57 am
broadband, we're going to focus on two primary measures the first is revenue growth, in excess of what would have occurred in the absence of broadband technology and in this sense, we're going to focus on essentially opportunity costs and say, well, its gains that should be attributed to broadband are in excess of the next best alternative, in this case, we're going to focus o dialup. in addition, we're also going to attempt to measure consumer surplus, which is simply the access of what a consumer is willing to pay for broadband so what he does have to pay and this dference is going to be accrued to him in the form of a surplus. and to jump to the main results, we find that in 2006, we studied the period 1999-2006 in hour paper, about $22 billion in revenue is generated from broadband, but this is very much different than what we contributed to create value and here we have a number of
9:58 am
$15 billion, $8.billion to $10 billion of this is new revenue generated by broadband suppliers and the remainder, $4.5 billion goes to consumers also indication of this is the price indices for broadband have declined 2% to 2.5%, which is different than the actual official numbers very wisconsin have been very flat duringúthis period, which is a mystery, because when you see this massive adoption, that's concurrent with a dramatic reduction in price to spur this adoption. we didn't see the official numbers hands part of the reason is we just weren't measuring the consumer surplus properly and what's going to jump out from the page is these numbers are drastically lower than the numbers you commonly see in projections of the economic value you see. usually they're in the range of hundreds of billions of dollars, we're about 1/10 of that at best, and there are two to three main reasons for this. first, we're very careful about
9:59 am
measuring what broadband is actually generating. we're going to be very careful to assign to the different buckets, which ones should go to broadband and which one should have occurred with dialup. you can think of two sides to the same scale, well, as broadband becomes comparatively more popular, dialup is becoming less popular, we can't attribute that whole left side just to broad brand because we're losing dialup in addition to that so the aggregate is not changing nearly as much as we expect just from the numbers from broadbandped secondly, we're not going to -- broadband. secondly, we're not going to worry about externality, such as people have a better user experience on amazon, so they'll buy more books from amazon. we're going to focus just on what we can measure, but in hour defense, one of the nice features of the methodology, is we're not missing the externality, because as was
10:00 am
shown in the slide, disruptive technologies will come at the expense of off line brick and mortar retailers. so amazon probably came at the expense of a barnes & noble, so we can't attribute all of this gains just to broadband and amazon. our numbers are going to be grounded inúexclusively historical facts and numbers. we're not going to take a base year of 2006 and extrapolate from there. we're taking the highest year and then extrapolating ponential growth wait. so we're just going to focus on general numbers hand this is going to diminish the economic gains occurring to broadband. to dll deeper and show you how we've calculated the numbers, we have the two sides, one is suppliers, and from the revenue, well, they're losing about 50% to 60% of this in cannibalized sales of dialup and second phone lines. as users switched over from their dialup service to broadband, they were dropping a service they probably paid $20 for in terms of dialup.
10:01 am
many people had a second phone line, there's another $20 drop. so a lot of times you'll be completely offsetting in terms of measuring g.d.p. and because of this, it's going to serve to pull down the actual number that we should put for broadband. and this number is going to vary wi the assumed price for broadband. we had somewhere between $36 and $40 in our paper and obviously, it's going to shift the line around a little bit on the assumptions. -- depending on the assumptions. we should be clear up front, this is not a measure of profitability for firms, this is simply a revenue number. we don't have any difference in the cost that applies broadband to the household and balls of this, this is all we can say is revenue, but put differently, we're also -- our estimates don't imply that the fir that are supplying broadband would be losing quite a bit of money. they're kind of within the reasonable ballpark. so we're in some ways very confident with the numbers that we shouldn't see these numbers in contrast to our numbers. :
10:02 am
10:03 am
>> this going to serve increase that contribution of broadband because we are accounted for the consumer surplus. in doing so we are notble to look at different elasticity. you can think of a teenager who is always on facebook and twitter. we are not factoring that in anywhere so again we're probably at more conservative estimate. also the survey is on 2002, as our experience has shifted and we now value broadband comparatively more. would probably expect a little bit higher to pay if we did a survey today which isn't quite so bad your we stop at 2006 but i think we want to extrapolate the figures through 2009. we want to be countable with the result. but not to jump the imprecations of what the numbers in our paper would mean for a policy discussion, as the whole bag across the country is $15 billion, this doesn't bode well for a cost-benefit analysis
10:04 am
in the last mile broadband out to rural areas. think of canada cash for clunkers team is. we have a broadband for boondocks a coven. were not very optimistic that if we are only getting $15 billion in the nation, 1 billion oort two to roll out to rural areas will be very effective in terms of contributing to gross domestic product or especially in the sense that we have these alternatives such as dial-up, which many users are already had experience with. and so we feel that the firms that provide broadband have already revealed that these are probably not the most cost-effective areas. every details cost analysis. so any subsidies that are going directly to rural household are going to come at the expense of not being offset by drastically increased benefits for household. and again, this is an analysis of household, and not businesses. and this is just the u.s. especially as we think of new
10:05 am
technology innovations coming on line, five or so years, we think that probably a better situation would be to wait and let them more cost effective technologies come and place your. finally i just want to point to future research. if you're that intereste in u.s., shane and i are currently working on doing a similar analysis for other world nations, and you can look for that later this year, if you're particularly interested. thank you. >> will the paper be done by the end of this panel? [laughter] thanks to our next speaker is chris forman who is associate professor in the robert and stevie schmidt term professor of it management of the college of management at georgia institute of technology. he is research interests include adoption and return to it investment among business, with particular interest in the role of geography and standards on the guy of it frastrture investment. he also sees innovation at the
10:06 am
it software industry. >> thanks. what i'm going to talk about today is this different study about the use of broadband, and specifically what i will talk about is the diffusion of the internet among businesses contribute to divergence in wages across locations in the united states. what we mean by convergence is that locations with high income have lower rates of growth and by divergence we mean those with highway level already have higher rates of growth. there is a lot of antidote evidence to support all of you but not a lot of statistics. so basically what we are going to do is work going to combine a data set on it investment and enhance internet like the commerce among businesses, combined that with data on wage roads and basically compare how changes in internet between 1995 and 2000, how that is associated with changes in wage growth across counties in the u.s.
10:07 am
so this is a location that we will study. basically we proceed into steps. we measure the average relationship between internet and wage growth across all counties. we're going to establish some kind of link. will show that there is an effect, although it is economically quite small, we worried a lot about a lot of the causality things that james talked about earlier, anit would also examine whether internet investment lead to fast wage growth and higher low income areas. so i'm not gng to spend a lot of time talking about the specific progression model, only say this is basically what would you. we look at how changes in advanced internet among businesses, how that is associate with chaes iwage growth controlling for local democratic characteristics into the same thing again looking to see whether that wage growth is faster than high income, high education, high population and highly intensive energy.
10:08 am
basically internet use among businesses as grades among regions are already doing well on a number of different areas. the i.t. investment data we use is from a private survey, one of the best available. it has data on 87000 established on advanced internet use along with a number of other dimensions of i.t. is. would aggregate us to a little over 2700 counties, and drop about 300 where internet investment, we don't have any data and because these are locations that are very, very low density and there is a lot of investment data. we combine that with local wage data from bls from the quarterly census of employment and wages, and then also corol changes in demographic hairdressing also collect some data from sensors and a variety of other places within the government. so the basic story, can really
10:09 am
be seen into pictures. so this is a graph of changes in internet use at the county level on wage growth. and this is the average relationship between internet use and wage growth. and you can see it is upward sloping but the slope is really quite small so there is a statistically significant effect, but economically it is really quite small in our data when you look across all counties. however, if you separate out those counties between those basically if you take the subset that have high income, education, high population and have a high faction of i.t. intensive firms, you can see the relationship is quite different. among them subset of firms exactly a song statistically and economically significant relationship between internet use and wage growth. again, these are among the locations that already doing well along in number of different, a number of different dimensions. so i can, and the outline is
10:10 am
we're going to establish -- so the next thing we will do, that is kind of descriptive evidence. than we do so more careful statistics first to establish that average link between investment advanced internet and wages, and then to see how that relationship differs among counties that already doing well. so basically, if you look at the average relationship, again, the effect is statistically strong but economically relatively small. so average levels of internet use are associated with pointed to 4% in wage growth among regions with no internet use. a one standard deviation increase in the use of internet associated with about a .33 increase in wage growth here to these attacks are statistically significant, but economically not large. over this time period, which is in 1995 to 2000, average wage growth is about 20%. so the internet use is
10:11 am
explaining relatively little of that. we do a number of -- we go to a number of statistical exercises to worry about some of the causality issues that jim and bitching about. i do want to spend a lot of time on that now, perhaps we can take those in questions. one thing we do release is to show, is to examine whether internet use is associated with wage gai prior to 1995, prior to the diffusion of the internet as sort of a falsification or sanity test and there's no evidence evidence that that is the case. the next thing that we do is we examine what location internet use is associated with wage growth. and basically we find that advanced internet is associated with wage growth and high income counties, and higher education counties, and also those with both high income and higher education. of course, there is a pretty strong correlation between those two groups.
10:12 am
probably one of the main takeaways from the paper, however, is the association between internet advanced internet use among businesses and local wage growth is strongest and primarily concentrated in what we call these high off after counties. these are counties again with high income, higher education, high population and large concentration of i.t.roducing and i.t. using firms. how much can we explain along those metrics? so you take those 180 counties that are high all factor counties, their rage wage growth over a sample that is 29.2% versus 20. for the rest of the county in our sample. so this hide all factors group advanced internet associated with 2 percentage points total wage growth. to put it another way, advanced
10:13 am
internet use among business explains one quarter of the 8.7 percentage point difference between the 180 high all factor counties and the rest of the counties in our sample. so just to conclude, i probably also won't use all of my time. so the use of advanced internet technology is associated with lol wage growth. again, looking at the county, at the county level, however, it looks like the relationship is isolated to particular locations, those that have high population in which high i.t. production and use are concentrated, and those were income and skills re also high. specifically, advanced internet use explains about a quarter of the difference in wage growth between those counties and the average county in the u.s. and we see little evidence of growth of internet use outside of urban areas.
10:14 am
we also, one thing i didn't spend too much time talking about, is relative little evidence that advanced internet is associated with growth in either employment or establishment. so our results are isolated, or concentrated in the wage. so with that, thanks very much. >> thanks, chris. as a fellow economist i make this next comment with all due respect, but we know on the economist to people who have real jobs. our next speaker is ralph everett who is the president and ceo of the joint center for political and economic studies, the think tank that focuses on the concerns of african or content other people's color. and prior to his starting that job in 2007, he worked for 18 years specializing in telecommute nations and transport policy as the first african-american partner in the law firm of walker.
10:15 am
>> thank you very much, scott. a pleasure to be here and i would first like to thank the panel for competing in s important work to. i am robidoux. i'm president and ceo for the joint center for political and economic studies which is a public policy research institute that for the last four years has spent time focusing on issues of concern to african-americans and people of color. now historic mission has been to develop research and policy initiatives aimed at helping our communities obtain the knowledge and political streng and economic might they need to improve their lot in life and to give the children, their children opportunities that they did not have themselves. so that is what i've here today because broadband goes right to the heart of this. in fact, broadband deployment axis and uses all important to us at the joint center that we recently created a media and technology institute to focus on this and other related issues. national, broadband has become a vital part of american life.
10:16 am
it impacts how we live, how we learn and how we earned. so it's increasingly an important factor in determining whether or not someone will be successful in life at all. but yet only a third of american households no broadband. and they have dial-up or they have no internet connection at all. on my first slide, gives one example of why that matters your kid is a well-known 2007 brookings institution report projected that for every 1% increase in broadband penetration industry, employment will rise by point you to .3 percent a year, it and increase of 300,000 jobs. another study says that a mere 7% increase in broadband access has tremendous economic impact. 2.4 million jobs per year. and as you can see on the sly, billions of dollars in iraq
10:17 am
economic benefits. super, rock band means jobs. in communities new jobs. on the next line here, here are some results from a study performed in california two years ago by sacramento state university. it makes a dirt link between broadband growth and the growth of economic indicats. new business ventures, new jobs and payroll growth. most notable is the funny thing increased broadband use contributed about 52000 of the 281 net new jobs created in california in 2005. that is about one fifth of those jobs. i look at these results like this and i c't help but think what broadband deployment could do for now what broadband deprived communities. and these communities tend to be communities of color, whose residents face tremendous barriers to employment. in some cases they do not have the basic skills to be
10:18 am
competitive. in some cases their children go to substandard schools. in these communities also tend to be socially isolated from the instream. you see the numbers before you. they are higher, the joblessne among african americans, bassett joblessness among black teens. let me focus on the fourth part on the slighter traffic and americans remain an all time low in broadband adoption. i really see a connectimn here. when you have a tenured in which access and culture of broadband use is not supported, then you can see why there are some economic problems that persist. but i also see a way out mf this. and it can begin with this natial broadband plan on economic growth, on job creation, on private investment. all solely lacking in many of our communities of color. in broadband i believe can provide a breakthrough in our communities. and educrat, the sec's plan, i want you to think what can you
10:19 am
do to give these communities a fighting chance to survive and recover. and we at the joint center stand ready to help you and we actually are working now to gather and analyze needed data and other information that can be of help in determining exactly how broadband deployment can bring economic and social progress to areas in a country where the progress of any kind is just a dream. if we want to be able to help you develop evidentiary record which are policy makers can craft that can help these communities move forward to a brighter day. so let me conclude with some specific recommendations that you see on the slide in front of you. first, we feel that the plans should call for innovative broadband infrastructure and revitalization plans of urban and rural communities. repurchasing empowerment and enterprise of initiatives
10:20 am
require broadband infrastructure to be integrated into municipal and community plans. and providing incentives for broadband deployment through other community development programs such as tax increment financing and industrial revolution bond for nonprofit. secondly, you should call for tax incentives to spur broadband deployment by private sector and to migrate new business venture to some of those low income communities. when you have broadba in distress community, they can can become homes and other businesses that require a broad connection. phonelines, and workers. and on the final slide, you ought to focus as well on raising awareness and access to broadband for de- skilled and underempyed. in other words, let's bring broadband to these communities and and help local residents get on line and begin to benefit from their access to the rest of the world. it begins with teaching how to use e-mail, how to get
10:21 am
information from the web, and how to use important applications that can change eir lives, on line job applation for us is. and finally an important, as we seek to broadband to underserved committees, it is very important that we support minority owned businesses. minority businesses represent a tremendouspportunity for us to bring economic progress to communities, particularly to their participation in broadband deploymentnd operations. these businesses tend to hire minority workers thus creating a positive effect for the local economy. and today more than ever we need to understand how to leverage broadband as an economic development also. broadband can be a key to whether communities live or die, and they can deliver hope to communities where opportunity is really fleeting. and to make this happen, we need a. we need ideas. we need a spirit of collaboration and a positive framework to achieve these goals. and we have the joint similar
10:22 am
look forward to working with the sec and other to bring all of this together. thank you very much. >> our final speaker is tom wheeler who is currently managing director of core capital partners. he haseen working in telecommunications issues, policy for nearly 30 years. most recently he led the obama transmission technology science in the arctic. is that an entrepreneur, and pr much every aspect and communications industry that i know of. tom, please go ahead. >> thank you. it is a privilege to be here and to be with this augusta panel. in case scott had skipped in his introduction that i may venture capitalist, i am the guy without the tie. but i've been asked today to address the question of whether or not broadband has an impact the decision-making, on the investment decision-making of
10:23 am
venture capital. and the answer is most assuredly yes. it is particularly true for a firm like ours, core capital partners, because what we invest in our i.t.-based companies. internet protocobased companies. and it is just simple that the better the distribution, the greater the opportunity in ip for the development of new companies with new ideas. i think it is intuitive that this affects other areas of venture capital such as biotech and other such things as well. but because the ability to move data is integral to innovation,
10:24 am
broadband ip means growth and opportunity because it is forever creating new ideas, new opportunities because of its nature as an iterative and compounding technology. what do i mean by that? ip is iterative and that it spawns additional ideas, additional vision, additional companies that improve on refine what the status quo is. ip is compounding because every timeomething is built, i creates the opportunity for something else to be built on top of it. and so we invest in ip because we believe that ip is the growth
10:25 am
engine for technology, for the technology economy. and we also believe that nothing that ip has ever touched has avoided being transformed by that event. i.t. is more than delivering zeros and ones. it is about delivering data in a format that can be used for other purposes. and companies leveraging the interactive and compounding nature of ip need to have the ability to move those apps around. period. sure, a lot of innovations ta place and can be contained in a data center, but they will have a broader economic impact from
10:26 am
the broader application of the ideas as distributed by a broadband network. but i think there is a bigger answer to the question th has been posed here today. and that is that connections have consequences. and that throughout history, network links have defined economics, and because they defined economics they define the way people live. in a broader scope, we are as we connect. and broadband ip is reshaping the patterns and traditions of the last network revolution. and therefore changing the economics that we exist in today, and therefore changing the way we live.
10:27 am
the first high speed network was the railroad. it was the original death of distance. since the beginning of time, up until the railroad, animal strength and stamina determined the ability to communicate. the htory shock parser has a quote i love wriggles the radio road, the complete is changing human existence since the nematic tribes became too grosgrain and raise cattle. it created the scope and scale economies. this network created the scope and scale economs that defined the 19th and 20th century. and that are the basis of the things that broadband ip is taking usut of now. it destroyed the distributed
10:28 am
self-sufficiency, self-sufficiency economy. and created a centralized economy, with masses amateurs being delivered for mass production and then shipped out to a mass market. and define ou urban geography a result. it also shaped telecom, because the telegraph all the railroads, the telephone call that ended even stole their terms or switches, trunks. told our railroad terms. but why am i talking about history at a forum that is supposed to be talking about what the future is? let me tell you a story. chicago is called the second city, as you all know. why is it the second city? in the beginning of the 19th century, the second city in america, in the west, access to the west was saint louis. saint louis was located on the western side of the missiippi
10:29 am
river. the rail lines to the east coast market were located on the eastern side of the mississippi river. the city fathers of saint louis refused to build a real road bridge across the mississippi, so that the network of the day could connect with the srce with the market. e city fathers of chicago, at exactly the same time, illegally built a railroad to connect with a new line coming out from the east. and beit 1861, there were a hundred 60 trains and out a day in chicago and saint louis was arguing about whether they should build a bridge. distributed broadband ip is the
10:30 am
greatest change to how we connect since steam on steel. you think is a economic growth? i say look at history. look at the history of in the last network revolution that we're talking about the network revolution that will build tomorrow. but i think one of the other lessons of history is that build it and they will come. exists only in iowa cornfield on the silver screen. that in the chicago story, for instance, the reason why they could build that connection was there was demand to wed the western range production with the east coast consumption. there was demand for the network. let me give you a more recent and personal story. years ago, when stephen case was the ceo of aol i was sitting in his office and he turned to me and said didn't he used t be
10:31 am
president of the natta? and i said, yeah. nava was delivering data at t-1 speeds in 1985. we recall the home computer network. and steve at the same point i've had a business down the straight called quantum computing where he waselivering at very slow speeds. and he said we used to really worry about you. and i said, we get to look down our noses at you. bakersfield were doing at t-1 and you are doingp there at a few thousand baud. and he said now look where we are. the point of the matter is that steve se was able to build to a demand. i was running a company that was trying to create a technology to drive the demand, and that i've got the bloody scars to prove that demand is mor important than supply.
10:32 am
last suggestion. the poster child of the economic stimulus was the cash for clunkers program. it created demand. why not a box for broadband program that creates demand. and a pulse on something that talking about here here i don't think it is necessary to appropriate funds, but we can use public policy to create demand for broadband electronic medical records. there is billions in his famous for that. let's stipulate that they have to be tied in to broadband. education and applications of federal funds need to stay plate they need to be tied into broadband. lph had the idea that enterprise zones need to stipulate that they are tied in to broadba. intelligent transportation systems need to be tied into broadband and a mandatory way.
10:33 am
public safety needs to be told that they must utilize private broadband networks. green and smart grid initiatives need to have broadband tie-ins before they get funding. the point of the matter is, we can create through public policy and additional take an existing funding mechanism that demand that will produce greater returns on a broadband future than just simply subsidizing the building up of the new capacity. so let me close with one last one. broadband ip is taking america back to the dispersed economic activity that was destroyed by the centralizing force of the last network revolution, the railroad. broadband ip is remorsessly slinging activity to the edge of the network, and at that edge
10:34 am
are individuals and entrepreneurs. the kind of people that we invest in. in the centralized economy, innovation happenein places like bell labs. massive places where you did and innovative activities. indeed decentralized broadband ip interconnected economy, innovation takes place with two guys and a dog in a gage. those are the kind of people that venture capitalists like us invest in. those are the kind of people who take that money, who turned around and hire others who spend that money at the grocery store to pay their mortgage, and to send their kids to college. so if we go back to theopic i was asked to address, es broadband availability influence
10:35 am
investment decisions, the answer is you bet. but the story is even bigger than that. that history's greatest changes have been driven by network changes. and that we are now at another hinge moment in new network development, and that opportunity, venture capitalist will invest in. >> if you have questions, write them down. and if you are watching on line, there is a way to submit questions or please do. let me sort of work backwards little bit. start with tom. and i really like you bringing history into this issue. i've also written on history but not as much as you have. and you can find sort of lots of similar debates that we have today historically with the telegraph, and even the optical telegraph before that and with
10:36 am
telephones, their interconnection and enter carrier debates back in 1900. with your studies of networks over history, do you see particular policy lessons, things that government did back then that either helped or hindered development of new networks and what we can learn from it? >> it is a very interesting question to this dreaded know about chicago and saint louis is the reason that saint louis didn't build bridges at the local politics was controlled by the water men who were ferrying things back across the river, and they didn't want the competition of the bridge. i don't think anything has changed in the politics of networks since that time. what is interesting though is that this agency, the sec, which has had a very important history but a history that has been
10:37 am
basically one of refereeing among various economic interest where the public benefit, as with this initiative the opportunity to become an economic growth agency. and to say that there are policies that we can initiate that will stimulate innovation and investment. and the only point i am making is that, as we saw on one of the charts, there is billions of dollars for venture capitalists out there thats ready to follow that kind of encouragement of innovation and investment from policy decisions. >> if anybody else on the panel wants to just jump in, and especially jonathan, if you have questions, please jump in.
10:38 am
ralph, also building on what both you and tom said about demand, one thing that you didn't mention in your discussion was sort of direct subsidies to users of broadband, which often, when we look at these, you see that one of the main reasons of people who don't have broadband, who won it, they say they can eher afford or don't have a computer, which those are relevant to divide issues, is do you think sort of, does that direct subsidies is less effective than sort of enterprise zones that you talk about or do they address different issues rex. >> i think that is a good point that you raise. i do think that the direct subsidies would be helpful in the process that a lot of times you hear people say they don't have this because of financial
10:39 am
conditions associated with such. i think we have used an approach where we do all of the above, if we can, including direct. i'm glad you raise that issue and i should've raised it earlier. >> this sort of to the economist, it seems that kind of putting it all together to find that broadband has an important but kind of indirect maybe economic effect because it is related to so many other things, innovative, and its innovative ecosystem. and given that, how do you then connect your comments to particular policies that the sec or any other pt of the matter might consider as a way to not just affect broadband but what they can do that can help ensure that broadband has some positive economic effect, or maybe it is the case that policies at this
10:40 am
point in the broadband aren't necessarily focusing on the economic outcome but just for some other goal. >> thanks, scott. the bottom line is because of the nature, the indirect nature of the benefit to broadband employment, which were described, which i and tom described earlier, keeping -- if broadband is easy to get, if it is cheap and widely deployed, that is of course good. however, we also know that the lions share of the benefits ar going to be concentrated in particularreas. so that's the first thing and in the second point i would like to make is that if we can make sure that broadband, the types of
10:41 am
traffic are not regulated in some sort of systematic way so that we can have unfettered experimentation on how broadband is used, that would be good, with the exception, perhaps, of peer-to-peer filesharing. which takes such a largehunk of broadbandraffic, it might actually inhibit other sorts of experiences you. >> so you think most broadband use then is not particularly related to productivity or economic effects? >> well, no. i would not say that. in the sense that if there are huge number of startups and other organizations, income and building out services for broadband is creating something. >> so that is the demand-side? >> gets. >> if i can mention one thing. i think one of the direct policy
10:42 am
implications that i have learned looking to the literature in seeing what we know and what don't get, is that the policy has to be very careful as to what it takes as its measure of success. r example, we don't want to pick on education anyway today, but if you look at wiring schools, progress has been made in that area. but the measure of success cannot be number of schools wired. it has to be what are they doing with it, how is it impacting, what gets done in the classroom, is it being used? so it takes an extra step, i think, beyond what many policies like to go in terms of measuring their success because it is easy to measure something like numbers of schools wired. is much harder, takes much more post-grant monitoring or whatever to figure out actually what the real effects are. i mean, that is one practical application that i learned when you have something collocated like broadband where you can't
10:43 am
just give it to someone and then it does its thing. you know, with the subsidies it might be more than subsidies. it might be giving the computer to the household, givijg the broadband connection, giving the training, something that goes as far beyond an agency like the sec has done in the past. >> i will confine my remarks to business investment, kind of the area i spoke about earlier. i think a lot of our findings are consistent with some of the things that james talked about earlier in terms of one potential explanation for the result that the impact of advanced internet use is greater in the use of higher education, high income, high population regions are some of the reasons that we hed about earlier. sohe importance of local skills, third party market, or outsourcing and technical and programming services, you know,
10:44 am
education, organizational change. all of these things which are easier to do in some sense i some areas, in urban areas, than others. so in so sense at least on the business side, it makes it that much more difficult to, you know, dryly faced a connection between rabin and investment potential in wages or economic growth. >> i have a general question to pose to the panel. and th is that as professor krieger pointed out there have been a number of different ways that's, the sort of effects of broadband been attempted to be measured and he identified some of the potential limitations. could i ask sort of an open-ended question about what
10:45 am
you do as some of the benefit that may not have been captured by the studies today, what might be done, and how important these overloed benefits are? because part of the purpose of these workshops is to try to get as much information as possible about the sort of potential benefits of deploying broadband, and if we concluded as ryan studies, the benefits are relatively limited, might affect our conclusions as to what policies we should adopt. so any suggestions on how to go forward, if studies capture more fully the social benefits of broadband. >> well, i will take a first stab at this very difficult question. we can't measure what we can't measure. and that is one o the reasons why it took so long for the
10:46 am
impact of icp to show up in the activities is that first researchers in the area had to learn what it means to measure something that can be as i.t. and ict actually is. so strides have been made in that area, but when you have taste let me give one example. you asked the first order question about what may we be in missing. so for example, productivity would pact of ict first showed up as in the knowledge producing ict producing sector itself. but that is where it is hard to measure the output of a knowledge producing term that might be less tangible. where the output of the firm is intellectual property, something like that, is much harder to measure them when they produce a widget that you can see, feel, touch. and put a price on it. so yes, i think we probably are still missing a lot how we measure it.
10:47 am
i don't have any great suggestions there, but i mean, the good point of what you can take from that whatever the impact are that we can measure, we can certainly scale that up by some unknown factor because impact has to be greater than just what we can measure. >> i guess as i said in my remarks that broadband impact is a way that we learn, live and earn. and i believe it also determines whether or notome is going to be successful in life. so i could not sit here and imagine, you know, a neighborhood or a state without broadband. i would not want to be in that state when i compare myself to others who have the benefit of broadband. so if you just sit back and imagine what your life would be like if you were in an area that did not have broadband. i think that he had to to your
10:48 am
question would become fairly obvious, that broadband is extremely important to whether or not one is going to be successful in life. >> as the other qualitative as opposed to quantitative guy, first of all i think we've got some issues with data lags. okay? we talk about latency of data and zeros and ones. there is latency of data that we can measure as well. secondly is -- i hope that this process doesn't lose sight of being a pro active encouragement of growth, not just a retrospective measurement of growth. and when you stop and think that what is at? it's 60% of all new american jobs, or some number like this,
10:49 am
come from small business. the kind of folks that, again, we invest in. none of the companies we invest in could make it on dial-up. period. full stop. and we need to be providing the platform, but we also need to be encouraging the demand that calls for that platform. >> in preparing for the stock, i looked around antry to find what people are actually doing on the web. and just some sort of standardized data of how people are using this technology, if it is delivered via broadband or dial-up, and it was very difficult to find anything. the best you can find it you can
10:50 am
see which website there was traffic. but we do not know -- you can take up a lot of samaras. i now beg i now beg on my so therefore i don't have to go to the bank. and that frees up times for other activities such as watching yoube videos which is of course highly productive. but there is certainly a trade off between mbe the internet provides us mo leisure time. but we have no idea as far as i can tell what those things are. and i think that really follows up on james' comment. we want to know if we'reoing to provide -- if broadband is to the house or if broadband gets to school, how is it being used, because without that we are really not going to be able to answer these questions. >> just two points. and this is going to follow-up with some of the other speakers have said as well. so certainly one challenge has certainly been that of data. so if you look at where we will
10:51 am
often see the impact of broadband, the the impact is going to come from business. and the data that we have on i.t. investment and business right now is pretty scarce actually. we end up using a private survey which we beeve in some of the best data on i.t. investment avlable, simply because firm level or regional investment in i.t. and in particular internet investment simply is not out there. so it makes it very difficult to quantify the impact of broadband because there just aren't the data out there. and i think that is hindering a lot of, you, a lot of issues in trying to understand the policy here. the second thing is, i mean, most of, and this will follow-up on some of what james said as well, a lot of the, this is a big question about what other
10:52 am
ares could we look at to understand. i'm just going to pick on one. the majority of what's been looked at in terms of business investment of i.t. or any kind of i.t. capital, predominately these kind of labor productivity studies that look at, you know, outlook depleted by labor inputs, or some similar measure. and we know very, very little about the impact on innovation or other measures of economic activity rather than just the one that, you, the one that everyone looks at which tends to be productivy which is what we have data on. so that would be the other thing that i would mention. >> okay. jonathan, do you want to do a question? >> one question, if i may. the range of studies reported on here or referred to here spanned some that look, residential
10:53 am
broadband penetration and some that looked at business broadband penetration. and i guess my question is, a plea for some help about how we should go about combining those indicators as we condu our policy analysis and try and figure out the overall impact, and sort of the one specifics of question of that is there any intuition to suggest or what is the intuition that might suggest that an increase in residential broadband penetration might have some affect on labor productivity or on gdp, beyond just sort of the end user experience. >> i will make a couple of remarks on a. so actually, in our work we actually combined one of the controls that we had was for our aggressions of the impact of
10:54 am
advance internet use we took the data on current population survey data on residential ternet use, and use at him in particular some of the data on use at work. and you know, although that seemedo have some effect, it wasn't, you know, the effects weren't as strong as that on kind of direct broadband or direct advance internet investment. there was one other -- and if you sort of look at correlations between the cbs sort of individual measures of investment and the measures that we use at the firm level, you know, there is a correlation, but it is in perfect in some sense. unfortunately, you know, i think that survey is not being refreshed every year so our
10:55 am
data, even at the residential level, the individual level, on internet use is somewhat imperfect so again we have kind of an issue associated with finding, you, another issue associated with not having data. >> could i ask a follow-up question based on your comment, and jim's earlier? which is that several of you pointed to the lack of data that would be necessary to do a more prece quantification of the impact and benefits of broadband. and so the question i pose to you is, can you identify and sort of give specifi suggestions about the kind of data that would be useful? because it could be something that we could include as part of our broadband plan. so i will give you an opportunity here to make some
10:56 am
suggestions. i also give you an opportunity to think about it, and then provide those suggestions to us at a later time. if anyone has an answer now. >> i think as an economist i think what we are interested in is the identification strategy to help uncover where the gates are coming for. and we usually don't get that because we had to rely on natural experiments to help tease out correlation and causation. and so i think what i would do just is that part of these policies really try to minimize the trials and sort of systematically and randomly pick winners and losers. we talked about earlier today. and say let's roll out gradually, and that weight we can invite who is gaining and what are the causes of these games. >> the two things that i would mention, one is just to reiterate one of the points i try to make during my talk is that certainly more could be done at the federal agency senses and data collection
10:57 am
effort. so for example, again, the comparison to europe, they are doing much more productivity. is a bit of a shame that anyone needs to go and probably a thousands of dollars for some proprietary data where the quality is unknown. and why can't we provideunding to the senses so they can do for mobile surveys to find out what firms are doing with their ict and the broadnd, how they're using it and so forth. so it is needed eight an easy place to start or a hard place to start with you and get intest in funding it. the other thing i would mention is just going back to, you know, as the studies are done, you know, we don't -- we can already lost the battleith getting a top to randomi to getting money to places in way that approximate a lab experiment there are still stated they are metrics that we can use. for example, one quick example, you can look at firms that just
10:58 am
barely missed the cut off, whatever the cutoff is going to be to getting a grant. those firms that just missed getting the money should be very similar a priori to firms that were just over the line. so in a sense they are similar in other ways, but that one got the funny and one didn't. so there's your control group and treasure expended for. you can do analyses of these and we have techniques for dealing with the sort of data problems. what is going to take realistically is probably a lot partnering with people outside of federal agencies to tap on that. that expertise for academia. >> so to part, we could even build on some of the surveys are out there. censusid a 2000 survey on business i.t. use at the micro level data, at the michael. so at the firm level that hasn't in general been refreshed over time. so information on that kind of data would be very useful.
10:59 am
the current population surveys, computer and internet survey hasn't been refreshed every year. and that has been a very useful source of data for folks that were studying early on, kind of the uses of the internet and impact of the internet at the individual lev. and that survey has not been unfortunately hasn't been refreshed over time. so those things are two things that have already been done out there that they would be very useful to continue. actually, it's interesting that researchers that are looking out for level or regional investment in i.t. almost always have to turn to private surveys at this point because the only official government statistics that are publicly, or even privately available are at the industry level, dor the most part. so these are things that have already been done in the past that if they could be done again in the future would shed a lot more lig on some of these issues. >> okay. so we will start with questions
11:00 am
from the audience. this first one actually built into some of these data issues because it's about enterprise customers. so the question is, the increased availability of broadband is a huge impact on the so-called enterprise customers and non-ict industries which is banking, airline reservations, ticketing, business process outsourcing c. the competition has failed to develop for broadband services resulting in supercompetitive prices which ran customers from capturing the potential of these services. how should i shall broadband center and the fcc adjusted pric issue and. lower prices can discern command. so in addition answering the question what do we know about business services available, broadband services available to businesses and prices? does anybody have -- >> so in terms of broadband services, i mean, that's not --
11:01 am
yeah, james, you would know to push the ball back at least a concentration of broadband providers are different across regions. that is nosomething i know as much. in terms of broadband services available beyond, you know, sort of prices, i haven't seen the most recent data other than the sort of traditional statistic that people have shown that is obviously more concentrated in highly urban areas. i haven't seen the most recent data. >> and i'm not even sure if there is, to what extent there are systematic data enterprise prices for broadband are we all know that the fcc haven't collected such data in the past so it's not there at the federal data collection
11:02 am
level. again, there probably are private sources out there. to be honest i don't think i've ever seen and used in a study. most private studies based on basic rate. and quite often prices are collected by researchers by having their graduate students hit websites in different locations and pull a prices. so it hasn't been rocket science in the past. so i would say we probably -- there is more than that we don't know that we do know about prices there. >> you think that is an issue that business enterprise prices are something that should be looked at along withll the other data issues? >> it's hard for me to imagine that that is the margin were federal intervention is most needed. i mean, if i can think of a competitive market for market where the private provision is probably working pretty well you would expect it would be the high-value enterprise customers. >> and the other thing here is so many of those situations, you
11:03 am
are actually talking about that are then turning around and being sold as a broadband service to track your credit card or when you swipe a credit card in the store or something like that, and how in the world do you get to that data, that pricing data. >> i mean, just to make one other point to follow up on some of the other comments on. to the extent that in our study a lot of the action has been in urban areas, and in urban areas competition has been quite robust. i don't know what the pricing data exactly are. but in genal if you look at sort of metropolitan areas, competition amongst broadband providers, at least in -- we don't know the pricing data, but we at least know the number of providers across regions. and that seems to be quite robust. and i would agree with some of the things that james has mentioned, that is probably not the margin that matters within urban areas. i think some of these other
11:04 am
things in terms of skills, third party resources available, outsourcing providers and thes things are probably going to matter more in the margin than pricing. at least in urban areas. >> that they put two questions together here to i think are related. and the first is whether anybody has said the affects of telework, job will not initially be created in underserved areas. they will be brought in from other areas. recalled his telework. jobs to people instead of people to jobs. and in the second question is then what mechanisms exist or could be developed to track a relationship between economic growth in employment, technical skills and education, and training to the central and economic stability of historically neglected communities. so what do we know about the effects of telework, and how would we go about measuring those effects, what would people need as a prerequisite to make that work? especially in historically
11:05 am
affected communities. >> well, i did run across a few studies when i was doing some earlier research on the business and how it is used. there actually is -- there are very few formal studies done on telework if self. mainly because well, can come if you don't have data you can't study it. the data are hard to come by but even with survey data, it is hard to tease out the impact on a particular worker of allowing that worker to work at home because of course, in, companies don't randomly assigned the option to do telework and so forth. so there are compounding factors. i think i only ran across you know, tuesdays i was a miniseries attempt at this. in 1000 had no effect and one candidate has a positive effect. so i would say we know very little about that. but you can surely imagine that it could have impact in many
11:06 am
ways, probably many of them nonquantifiable and probably many of them not a benefit to the firm but to the worker. let's also ask a break that second question out a little bit more. . . >> can one of my ecommerce help me out on that >> i think -- i agree that i don't think there have been a
11:07 am
large number of studies -- my understanding is the information that is out there suggests most of the teleowork that is going on and not people coming from the city and doing their work, it is not a complete substitute for worked in a place of business at least right now. most of the telew currentork suggests that is a compliment to working in a place of business of people a spending three days of weekend work and two days at home. it is important to be clear how it is being used right now. in terms of the second question, there is a lot of meat.
11:08 am
i think -- i think i agree the questions on causality are pretty daunting but even beyond that, i don't think there have been a lot of surveys about where people are doing -- who is doing the telework, how much are they spending time at work verses at home. most of the information we have is out there. there's a lot of coming back to the data issues, a lot we can know before we progressed farther. >> can i try and off the wall thing? i am saying to myself if somebody came off the wall thing? i am saying to myself if somebody came to me with an idea that married telework with crowdsourcing as a variation of outsourcing of work, and i would
11:09 am
think that would be a really interesting business idea. but i would stipulate that it reques broadband connectivity. again, i think what we are playing with here is we are playing with how do we establish demand that drives into the market this kind of connectivity so that there will be residual activities like telework needs crowdsourcing, then nobody dreams of today. i know of examples in the developing world where there is telework, an outfit called tx text, i believe, where they use
11:10 am
crowdsourcing concepts omobile phones in the bush in africa to do work in a central city. but it requires this kind of connectivity. you can take connectivity to enterprise areas, e challenges we have, those things result. >> related to that, i would be surprised, given the information we have, simply providing broadband to underserved communities would do much of anythi of high-value. if it was not couple with a whole bunch of other programs that have made broadband, high value and other communities like improved education, improved training for social skills, a wide variety of things. if all we did was provide broadband to underserved
11:11 am
communities, it would probably not provide many benefits at all. >> but broadband would open additional opportunities on education and other things you get through broadband by not having broadband, you would have access to those types of things. >> we have to do a study. >> we have heard from today, not mine, i will point out, the benefits in terms of wages have come to communities that are already highly distributed. >> there is a variation on this theme, back to the point i was trying to make, you can't force demand with supply. first, you have to have the man. in a national broadband policy, needs to worry about how am i going to create demand. when i put demand into that impacted area for this purpose, low and behold, people start
11:12 am
hanging things -- and other things you never anticipate, that it has to start with that demand. whether it is broadband in rural communities -- >> there is little effect, that is the basis of the statistical comparison in ateady. it is insufficient to start with broadband. we must also provide education and other activities that may be beyond what the fcc does, but without that, we will provide broadband which will not really be used. >> if i could jump in here, the reason for this is most of this is dial up after the e-mail. the very basic services on the internet that huge gains come from are already available, broadband provides incremental benefits so there will be a huge effect. we have seen it already with dialogue, which i think's especially consumers surveyed, their time on line at least in the middle of this last decade, they didn't increase their use of intert drastically once
11:13 am
they got broadband which goes to evidence that it is not transformed technology over and above what by law provided. at the same time, there will be diminishing gains as they continue to roll out broadband services. >> more broadly, there's a lot of -- at least in our study, one of the takeays, there's a lot of complementary other stuff you need to see wage gains. some of those are associated with lower costs associated with cities, either lehman markets, education, things of that nature. that collection of things, the things we have been talking about, lowering the costs of not just broadband investments, but the things businesses need to do to use broadband effectively, it is not just building a broad band connection, it is creating
11:14 am
e-commerce and doinghe logistics and other things that are needed to create a business model out of broadband and all those things are easier to in some of the areas that are already doing well. on the other side, a neglected thought is that oftentimes, we usually think of broadband or networks as being complements to face-to-face communication but there's a lot of evidence that suggests in things like an entrepreneurship, people need to meet once or a number of times in addition to the telecom or icts enable communication, those are easy to do in locions that are -- from our work, we see the challenges of getting benefits
11:15 am
out of in our case advanced internet investment, you need these cplementary things that are available in particular locations. >> how do we think about the incremental returns? you pointed out that we want to measure the economic effect, you want to measure the improvement ov what it replaced. broadband isn't either/work. there are lots of flavors of broadband and some people care about faster speed, lower leniency, less jitter. what are the increments that matter, how people value different products? >> that is a good point. we are tracked -- talking about broadband generically but there are very different types of broadband, various speeds, qualities and prices, to the average consumer, look back to
11:16 am
the survey conducted in 2004, they did put price on that, consumers were willing to pay $26 more per month to have broadband over dialogue, because it is always on, it is more reliable, faster speed. the willingness to pay is how has economists we measure the gains that will accrue from something. they are revealing by their choices what is their service, how they prefer broadband or dial. if they were drastically greater, the numbers would jump off the charts and everyon would dropped dial up straight away and we didn't see that in the data. there is evidence that they are willing to pay more for broadband but so -- not so more that is transforming live, complete the new technology. >>an i push back a little bit on what you just said?
11:17 am
since 2004, there have been a number of new applications that have been made available that would not be made available over dial- dial-up, online banking, online government, this might have increased the value of broadband so people who would not take dial up would find it useful to take broadband, and a 2004 survey considered what applications were available to broadband then that were not available for dial up, probably might underestimate the value in 2009 where the is so much more available. i welcome your response or any
11:18 am
of the panelists. >> it is hard to imagine something like youtube being it compelling technology of the dialogue. is not useful for consumers. at the same time the beauty of the mythology which goes on -- i am sorry -- nobel prize-winning work, we are not properly attributing the gains for what they are replacing. if you're on youtube more acute, you're watching tv less. that affects the economy, may be decreasing over others because something like television studio will not invest as much quality in programming because they can't catch the advertising, so quality of media in general has declined. we take a stab at trying to measure those. it is important to consider what we are giving up as technology progresses. not just simply say we like youtube lot, what is the value above and beyond what occurred without broadband. >> what i was suggesting was
11:19 am
that data used based in 2004 on how did consumers value broadband over dial up may be no longer relevant. i am not disputing -- >> you are absolutely right. we continue this methodology. my point is for overall economic gains is not going to matter. they will be offsetting. just because consumers are revealing their not going to buy a movie from blockbuster at this point. the overall impact on the economy is offsting. >> the big benefit, at least to consumers, is video. that is what you're getting. banking, you can do over dial up without much trouble. i can researchy concern over dialogue, i can do my e-mail over dial up, the inferior technology works for most of the things people are going to do on
11:20 am
the web with the exception of video. what is the value of having internet videos? we don't know. >> i think we fall into a trap if w say -- if we assume that economic growth and consumer use are synonymous. i really don't think we are talking about universal youtube. we need to enabl the productivity in the engines that will hire people and allow them to go to the grocery store. we have multiple companies that are virtual companies, a marketing guy is down south,
11:21 am
they have got to have broadband connectivity. >> they do, don't they? >> they do, but they are limited, they make their life decisions around that, they have to make corporate disions around that, there is a limitation. i am not disputing, i circulated at the outset, first, you create demand, that will cause the investment to go out there. for new broadband. but we need to look at it as a lot more than consumer applications. >> i am in complete agreement with that statement. my question would be, what evidence do we have that businesses are not being served sufficiently well?
11:22 am
>> the kind of compounding ip that i invest in has to have broadband, in that we are defect go making decisions as to weather economic investment is going to be made because you can only place them in certain eas. >> you're leaving out certain people in san neighborhoods and certain talents because they don't have broadband connectivity. >> i am not -- we are looking at the wrong thing. we are looking at the pipe, we have to be looking at the reason for the piper. we need to bsaying what are we doing as federal policy to incentivize people like us and others to want to invest in building that pipe to the demand? we don't look at it that way. >>, jonathan, you want to say --
11:23 am
>> i want to partially after question i asked before. if we wanted to measure what you re talking about, this business or residential or neither? >> what i am talking about is business. we have seen the spurt in economic growth from consumer applications of broadband. they are going to disappear. but i think the great compounding activities are in the enterprise space, and we have to enable those compound in activities. we don't have any data on what is happening other than anecdotal stuff. >> just to follow up, i agree completely that if you are going
11:24 am
to see an impact on measurable economic returns from internet investment, that will come predominately from the business sector. to follow up on the original question about measuring different dimensions of broadband, to come at it a different way, we need to know more about measuring different applications of broadband. we are not just talking about plugging in a pipe to a business. there is a lot of college and 80 to make this happen -- this is dependent on whether this is a collaborative technology or enabling supply chain logistics, all of those things, the questions we are asking about the impact on local economy and how that goes across locations, likely to vary significantly across these applications.
11:25 am
>> more questions from the audience to further this discussion. people are itching for a fight. could chris and ralph comment on their conflicting broadband deployment? broadband availability has not had a substantial impact on wages f low-income or education populations and broadband availability would benefit all populations, are these in conflict? can they be reconciled? does the answer depends on short verses long term and a third question, how they take into account innovation. why do you disagree? >> i was setting existing studies from sacramento state university where it shows there was a direct link between economic growth and indicated in
11:26 am
terms of new jobs and payrolls. i am sure there are studies allover. one thing clear from this discussion is in order to go forward, there's a lot more data that we need to collect and understand in this area so there will be studies that differ. that is what i was sighting. >> i don't want to start any fights here. [talking over each other] >> that is right. that is right. that is right. it is an extraordinarily difficult question. james alluded to this in the first talk, disentangling the supply verses demand in some sense. there have been a number of studies that have examined
11:27 am
differences in local supply, associated with broadband providers, local employment, we need to be a bit careful because there are a tricky issues and broadband providers. we try to address in a careful way. something we need to look at very carefully. short verses long run approach, weere looking at the period to be clear, a different salple period between 95, and 2000.
11:28 am
more work needs to be done on more recent data, at least in our own study, we tried to see whether internet investment in 2000 was correlated with future wage gains, this is short verses long run issues, i didn't talk about that in my remarks. what we seem to find is there was the short run increase in wages associated with internet and the difference between what we call the high factors for other areas but there were not additional benefits, at least associated with 2,000 investments as you go from 2000 to 2005. i want to be careful in sayg this, that this is looking at the affects, long run affects of this 2000 investment on future data. there is a lot of work to be done here that everyone on the
11:29 am
panel has mentioned, about looking at either different margins of investments for future data, what we have and what other folks have done to flourish this out. there's a lot of additional work that needs to be done. >> looking for the financing, we can probably get together, get some new data. talking about data from 1995 to 2000, talking about how fast things have changed over the last nine years, people are using it differently and everything else. we can get together on this. >> this is the third time i have said the samething. it appears from the slide that the studies we are referring to, was referring to actually looking at residential internet penetration and the data chris was usings based on business. so it is at least possible that
11:30 am
they are reflecting different mechanisms or different phenomena. we don't know. >> a quick clarifying question. when you talk about people do one thing or not spending money on another, is there any data on what sorts of things are being crowded out by broadband activity? >> we have the numbers on dial up. that is immediately in there. we have to do a more systematic consumer survey and see how they're spending their time on line. a chip to amazon is different from a trip to an offline retailer. we don't have systematic numbers on that. there will be studies like that, we just haven't incorporated them into our analyses. it is something to consider. >> any comment before we fish? if not, i want to thank all the panelists for joining us, those who came out of town on their own expense, very grateful that you did. it was an interesting
11:31 am
discussion. i learned a lot from it. thank you very much. [applause] >> we will return to our live coverage of this fcc forum on making broadband internet access available across the u.s. when it resumes with a discussion this afternoon about job training and effect on the work force coming up at the one:30 eastern on c-span ii. followin the death of senator edward kennedy, president obama made a brief statement to reporters at his rented vacation home on martha's vineyard, mass. president obama eulogizing senator kennedy as one of the most accomplished americans in history, and a man who's worked in congress helped ge millions new opportunities. senator kennedy spoke last august that the democratic convention in denver afr introductory remarks by his
11:32 am
niece, caroline kennedy and a filmed tribute to him. >> ladies and gentlemen, senator edward kennedy! [applause] [plause] [applause]
11:33 am
>> thank you, thank you. thank you. thank you very much. thank you very much. thank you. thank you. thank you. thank you. thank you, caroline. my fellow democrats, my fellow americans, it is so wonderful to be here. [cheers and applause]
11:34 am
nothing, nothing is going to keep me away from this special gathering tonight. [cheers and applause] i have come here tonight to stand with you to change america, restore its future, to rise to its best ideals, and to elected barack obama president the united states. [cheers and applause] as i look ahead, i am strengthened by fami and friendship. so many of you have been with me in the happiest days and the
11:35 am
hardest days. together, we have known success and seen seacks, victory and defeat, but we have never lost our belief tha we are all called to a better country and a newer world, and i pledge to you can, i pledge to you that i will be there next january on the floor of the united states senate. [cheers and applause] thank you.
11:36 am
thank you very much. for me, this is a season of hope. new hope for justice and fair prosperity for the many, not just for the a few, new hope, and this is the cause of my life, new hope that we will break the old gridlock and guarantee that every american, north, south, east, west, young, old decent quality health care as a fundamental right and not a privilege. [cheers and applause] we can meet these challenfess with barack obama. yes, we can, and finally, yes,
11:37 am
we will. [cheers and applause] barack obama will close the book on the old politics of race, agenda, and group against oup, straight against the gay. [cheers and applause] and barack obama will be a commander in chief who understand that young americans in uniform must never be committed to a mistake, but always deployed worthy of their bravery. [cheers and plause] we areold that barack obama
11:38 am
believes too much in an america of high principle and bold endeavour, but when john kennedy thought of going to the moon, he didn't say it is too far to get there, we shouldn't even try. our people answered his call and rose to the challenge, and today an american flag still marks the surface of the moon. [applause] yes, we are all americans. this is what we do. we reaed the moon, we scaled the heights. i know it, i have seen it, i have lived it, and we can do it
11:39 am
again. [cheers and applause] there is a new wave of change all around us, andf we set our compass through, we will reach our destination. not near the victory f our party,ut renewal for our nation. this november, the torch will be passed again to a new generation of americans. so with barack obama, and for you and for me, our country will be committed to -- the work begins a new, the hope rises again, and the dream lives on.
11:40 am
[cheers and applause] ♪ ♪
11:41 am
♪ ♪ ♪
11:42 am
>> senator ted kennedy died last night at the age of 77 after a yearlo battle with brain cancer. this weekend on book tv -- >> in 1959 athe heat of the cold war, soviet premier nikita khrushchev took an unprecedented two week to or of the u.s.. peter carlson recount that. >> british prime minister gordon brown and israeli prime minister benjamin netanyahu take questions on the release of the
11:43 am
pan am bomber, iran's nuclear capabilities and least peace process. this news conference followed a meeting, 20 minutes. >> let me welcome prim minister benjamin dan yahoo! it is a pleasure to work with you on all the issues, the future of the world. prime minister benjamin netanyahu is a man of courage and we have had good talks today. discussions as realistic as ever but more optimistic than before. i reiterated that we in the united kingdom will always remain a strong friend of israel and israelis and palestinians will always be able to count on r support for peace. we share a vision of a secure and confident israel, welcomed
11:44 am
by its neighbor after decades of waiting, a secure and viable palestine in region at peace with itself. i strongly agree with prime minister benjamin netanyahu, we talk about this on many occasions, the palestinian economyust be allowed to flourish. i strongly welcome his recent move to move checkpoints on the west bank, and sustained political dialogue. the prime minister is committed to exactly that. we also discussed the issue of settlements in jerusalem. i made clear that a settlement activity was a barrier to the solution. but there was a genuine will to make progress. such activity would result in many false steps toward normalization for arab states. president obama has my strong support in this effort to pursue this agenda and i hope prime minister benjamin netanyahu will meet tomorrow, the u.k. will work for the u.s. and european
11:45 am
union and the international community for politically, economically and secity, the implementation of a future peace agreement. we alsdiscussed and will continue to discuss iraq. i made it clear to president benjamin netanyahu that we deplore recent comments from the iranian regime about israel. such diatribe has no place in the civilized world. we also share israel's concerns over iranian ambitions to develop a nuclear weapon. the region and world have nothing to fear, iran's actions to not take their hard against convincing. the unpcedented offer of engagement. the international community will review ambitions with suspicion. welcome again. i will work as closely with you
11:46 am
as ever to share anxieties about iran and the common desire for peace in the middle east. i will be happy to answer any questions after this statement by you. >> thank you very much. i am pleased to be here in great britain today with my good friend, good friend of israel, gordon brown. we are linked by a shared history, a common relationship based on shared values of common interest, palestine exploration.
11:47 am
kate undertaken by british and the nineteenth century and the findings, there was a shared heritage. we know that from your own personal -- we have, in hopes and also common challenges. and the need to prevent iran from developing nuclear weapons. it is clear such weapons would pose a great threat to israel, a region, to the world, i would like to take the opportunity to command continued efforts of the british government to address this threat. a clear voice out of london and other capitals of the world, we
11:48 am
should expect all responsible members of the international community to show similar results and discuss the peace process. i reiterate israel's commitment to peace, and outline what i believe is the winning formula for peace, a demilitarized palestinian state that recognizes the jewish palestinian state. we are working hard to advance a peace process that will lead to a natural peace results. we hope to move forward in the weeks and months ahead. we have already moved. my government has removed 150 -- 147 jackpoints. the 14 remaining checkpoints, manned 24 hours a day, seven data week, to facilitate -- i have extended the time of passage from the bridge over the jordan river in order to
11:49 am
facilitate movement in and out of palestinian territories. we seem to remove economics activity in the west bank. we have moved on the ground. we have also moved ideednd inward. i have spoken about the need to achieve this, demilitarized palestinian state next to a jewish state. and i think this is far and wide. it wasn't easy to do. this is what we have done in a short period of time, months. we have moved, we expect similar movement from the palestinians. certainly, based on what we have seen, there has not been that movement. but there has to be.
11:50 am
there has to be not merely a partner on the other side, there has to be a courageous partner. i think we have shown a certain amount of fortitude and leadership, that is what is required on the palestinian side. they have to say unequivocally that it is over. we are going to make real peace, final peace, peace that will end all plans to further conflict, a piece that will result in palestinian refugee issue once and for all, just as jews can come do is go, palestinians can come to a palestinian state. if we are asd to recognize a palestinian state, the palestinian leadership will have to accept israel as the nation state of the jewish people.
11:51 am
th absence of such clear and forthright expression by the palestinian leadership of such recognition has been what has been holdingeace up. we have moved forward, we intend to move forward, we expect the palestinian partners toe courageous partners of peace, and with the help of the friends in the united states and elsewhere, i think we can achieve progress, it may confound the cynics, there is no substitute on all sides. i want to take this opportunity to thank you, a chief individual, a true friend of peace and champion of decency,
11:52 am
and i want to express my hope that you will continue working together with the people of israel. and the benefit of peace. thank you. >> thank you very much. prime minister and, i have to ask about the release of a lot of people, why you have remained silent on this issue until now, with the involvement of the u.k. government in his release, we have seen an angry response from washington. what is the posion of the british government? does the british government think it was the right thing or the wrong thing to release this man? >> my first thought was with the family of the victims. i have to tell you that i was both angry and i was repulsed by the reception that a convicted, guilty of a huge terrorist crime, received on his return to
11:53 am
libya. i met general gaddafi over the summer, made it clear to him that we have a new role in making the decision about e future. because it was a quasijudicial matter, a matt legislated for by the scottish parliament and not by us, it is a matter for which we could not interfere and had no control over the final outcome. i want to make it absolutely fear -- clear that whenever decision was made, our resolve to fight terrorism is absolute, our determination twork with other countries to fight and protect terrorism is total, and we want to work with countries, even countries like libya, who have renounced nuclear weapons and want to join the international community, we want to work with them in the fight against terrorism around world.
11:54 am
>> two aking fotongue] what is your reaction to breaking the silence? >> i think we are trying to achieve the reactivation of the peace process. second, to enable normal life, israeli residents, we have a quarter of a million such people. the classrooms, a kindergarten, they need to have a place to house the families. this is very different from grabbing land. i made it clear we are not going to do that.
11:55 am
what we are seeking to achieve with the united states and the talks we have conducted is to find a formula that will enable us -- enable those residents to continue to normalized. not necessarily what has been reported. you will hear it loud and clear from the. >> we went to do everything in our power to support the peace process. we want an israel where people are safe against the threat of terrorism. that should be diminished by any actions that are taken. we want a viable palestinian economic state so people can see the benefits of prosperity and peace and working together. we want to work with prime minister benjamin netanyahu and make sure that happens and we want to involve the rest of the
11:56 am
arab states in making sure that they support a peace process as well. >> question to each of you. whether you continue, while utah, continue to house jews in thpart of jerusalem that israel captured in 1967, and mr. brown, do you think the scottish decision on the release has undermined britain's position with allies like israel and the u.s.? >> i made it clear in my conversation with president obama in washington and since, that jerusalem is the sovereign capital of israel. we accept no limitations on our sovereignty. to put a fine point on this, the settlement issue is outstanding, has to be one of the issues
11:57 am
resolved in the negotiations alongside with palestinian recognition of the jewish state and effective demilitarization arrangements from any future peace accord. our position as the united capital of the jewish people, we have only been around for 3,500 years. we have into it all be equal rights and benefits of the jewish residents. i don't think what hahappened -- >> i don't think what does happen will undermine the relationship with israel or the united states. i made it absolutely clear that whatever the decision is made on a judicial basis by the scottish parliament, our determination to fight terrorism is clear. is shown in all the action we have tak since september 11th, is shown in the support we have given in iraq and afghanistan to
11:58 am
fight terrorism, and it is shown in every action we have taken to protect the british people and protect people beyond britain against the threat of terrorism. >> question for both prime ministers, something that has to do with clarifying as soon as possible because time is ticking away. the iranian problem, according to your intelligence, how much time do you evaluate is left until iran, before iran reachedes the point of no returnand all peacefpeaceful me or fail, these eventually military action will be taken against iran? >> i'm not in the habit of giving out details of
11:59 am
intelligence advice given to us about nuclear-weapons, but i do say to you that we recognize the threat posed by iran, we recognize that if they make the decision to go forward and acquire nuclear weapons, that is profound significance for the rest of the world, we believe iran has a choice, they can work with the international community, giving access to nuclear power, take their rightful place as of peaceful and important partner in the world, where they can find themselves ostracized and excluded, the decision to break the non-proliferation treaty and hide from the world what they're doing to build up nuclear-weapons. we hope iran will make the right decision. president obama has offered iran -- i also believe we have to leave open every option in our dealings with iran. if there is no further progress immediately, then i believe the world ll have to look at

U.S. Senate
CSPAN August 26, 2009 9:00am-12:00pm EDT


TOPIC FREQUENCY Israel 14, China 14, Canada 8, Washington 6, Benjamin Netanyahu 6, Doha 5, Obama 5, Chicago 5, Scott 5, Iran 4, Bruce 4, Wto 4, Ict 4, Fta 3, Caterpillar 3, Britain 3, Jerusalem 3, Panama 3, Second City 3, Academia 3
Network CSPAN
Duration 03:00:00
Video Codec mpeg2video
Audio Cocec ac3
Pixel width 544
Pixel height 480
Sponsor Internet Archive
Audio/Visual sound, color
disc Borrow a DVD of this show
info Stream Only
Uploaded by
TV Archive
on 8/26/2009